Stiglitz: We Should Have Nationalized Banks

The U.S. economy is suffering because the government did not fully nationalize distressed banks, says Nobel Prize-winning economist Joseph Stiglitz.

Nationalization would have give the government more control over financial institutions and basically forced them to lend and kick-start the economy quick into recovery, Stiglitz says.

“If we had done the right thing, we would be able to have more influence over the banks,” Stiglitz told Bloomberg News.

“They would be lending and the economy would be stronger.”

U.S. Treasury Secretary Timothy Geithner has said that banks, which accepted billions in bailout money, need to take on more risk and lend again, which would help fuel faster economic recovery.

“We have this very strange situation today in America where we have given banks hundreds of billions of dollars and the president has to beg the banks to lend and they refuse,” Stiglitz said.

“What we did was the wrong thing. It has weakened the economy and has increased our deficit, making it more difficult for the future.”

“Too big to fail” has become a catch phrase these days as big banks, flush with bailout money, dole out bonuses while Main Street still suffers from high unemployment.

Democrats in Congress are jumping on the political opportunity to cut off the government purse strings via limiting Federal Reserve lending to bailed out banks and giving regulators more power to break up large institutions.

“No more Fed (money) to AIG. No more Fed to Bear Stearns,” says Rep. Barney Frank, according to an Associated Press report.

The U.S. economy is suffering because the government did not fully nationalize distressed banks, says Nobel Prize-winning economist Joseph Stiglitz.Nationalization would have give the government more control over financial institutions and basically forced them to lend and...